Essential Guide to GST on Educational Institutions: Compliance & Efficiency
Updated on : March 17, 2023 - 3 p.m. 17 min read.
Educational institutions have become a significant topic of discussion as they are not only involved in imparting knowledge but also generating revenue. The taxation of educational institutions under GST has undergone several changes making it important for educators and students to understand the various nuances of the law. From fee structures to exemptions this topic requires a comprehensive understanding of GST and its impact on the education sector.
What were the pre-GST laws for Educational Institutions?
Before the introduction of the Goods and Services Tax (GST) in India, the tax regime for educational institutions was governed by a set of laws and regulations.
The most significant of these was the Service Tax Law which came into force in 1994. Under this law educational institutions were exempt from service tax if they were approved by certain bodies such as the University Grants Commission (UGC) or the All India Council for Technical Education (AICTE). However certain services provided by educational institutions such as renting of immovable property, catering services and transportation services were taxable.
Additionally there were various state-level taxes such as Value Added Tax (VAT) and Central Sales Tax (CST) that applied to educational institutions.
What is an Educational Institution under GST?
Under GST an educational institution is defined as an institution imparting education up to higher secondary or equivalent which is recognized by the central or state government or any other statutory body authorized for this purpose and where services provided are exempt from GST. However if such an institution provides any other services such as accommodation or food they may be subject to GST.
Are educational services considered a supply and are they taxed?
The taxation of educational services has always been a debatable topic. The introduction of the Goods and Services Tax (GST) in 2017 has brought a significant change in the taxation of educational services.
Under GST educational services are considered a supply of services and are taxable. However the government has exempted certain educational services from the purview of GST. Let's take a look at the different types of educational services and their taxability under GST.
Firstly pre-school education and education up to higher secondary level are exempt from GST. This means that services provided by schools and colleges up to Class 12 are exempt from GST. However services provided by coaching centers tutorial classes and other similar educational institutions are taxable under GST.
Secondly, higher education institutions such as universities colleges, and institutes offering degree courses are also exempt from GST. However services provided by these institutions, such as hostel accommodation, transportation and catering services are taxable under GST.
Thirdly, vocational training institutes and skill development centers are taxable under GST. Services provided by these institutions are taxable at the rate of 18%.
Institutions are eligible for exemptions
The GST law provides certain exemptions for educational institutions that meet certain criteria. These institutions may be exempt from paying GST on certain services such as
- Transportation services
- Accommodation services
- Certain types of catering services
To qualify for the exemption the educational institution must be a recognized body that is authorized to provide education services. This includes institutions such as schools colleges universities and other recognized educational institutions.
In addition to the exemptions educational institutions may also be eligible for input tax credits on certain expenses such as office supplies, textbooks and other materials used in the course of providing education.
Should educational institutions also get register for GST?
Whether educational institutions need to register for GST depends on their annual turnover and the specific laws and regulations in their country.
In India educational institutions are required to register for GST if their annual turnover exceeds a certain threshold. For example, in India educational institutions with an annual turnover of over Rs. 20 lakhs (or Rs. 10 lakhs in some states) are required to register for GST.
However there may be certain exemptions and provisions for educational institutions in the GST laws of different countries. It is important for educational institutions to consult with a tax professional or seek guidance from their respective government's tax authority to determine their GST obligations.
In general it is advisable for educational institutions to comply with the tax laws and regulations in their country to avoid penalties and legal issues in the future.
GST Applicability to Higher Education Institutions
In India, GST is applicable to higher education institutions if their annual turnover exceeds a certain threshold. Educational institutions with an annual turnover of over Rs. 20 lakhs (or Rs. 10 lakhs in some states) are required to register for GST and collect GST on the services they provide such as tuition fees, hostel fees and other charges.
GST application to training programmes, camps, yoga programmes and other events
The applicability of GST to training programs, camps, yoga programs, and other events depends on the specific nature of the event.
In general if the event is being held for commercial purposes and there is a charge for participation, GST may be applicable. For example if a yoga studio or training center is conducting a paid yoga program or training session they may need to register for GST and collect GST on the fees charged.
Is GST applicable to books or stationery distributed to students?
The books and stationery distributed by educational institutions to students are exempt from GST. This exemption applies to books, notebooks, pencils, pens and other stationery items that are supplied by an educational institution to its students as part of the curriculum.
GST charges on private coaching centres and distance education with example
Private coaching centers and distance education institutions are subject to GST based on the services they provide.
Private coaching centers that provide coaching services for a fee are subject to GST at a rate of 18%. Similarly distance education institutions that provide online courses or programs for a fee are also subject to GST at the same rate.
Let's consider an example of a private coaching center called M/s XYZ Tutorials which provides tuitions for Class 11th and 12th students for subjects such as Maths, Physics, Biology and Chemistry including JEE exams. A student enrolls in their Class 12th program plus JEE coaching for which the billing is as follows:
- Tuition fee: Rs. 35,000
- Books: Rs. 10,000
- Maintenance fee: Rs. 5,000
- Total value of invoice (before tax): Rs. 50,000
The taxable value would be Rs. 40,000 (Rs. 35,000 + Rs. 5,000), and the GST charged would be Rs. 7,200 (18% of Rs. 40,000). Thus, the total payable would be Rs. 57,200 (Rs. 50,000 + Rs. 7,200).
Private coaching centers and distance education institutions are required to file GST returns like any other taxpayer in GSTR-1 and GSTR-3B either monthly or quarterly depending on their turnover and whether they opt for the QRMP scheme. If they have opted for the composition scheme for service providers they must pay tax in CMP-08 and file GSTR-4 once a year.
The rise in the cost of higher education and distance education due to the implementation of GST has become a concern in India, given the country's large population and poverty. While schools are exempt from GST the same exemption does not apply to higher education institutions leading to an increase in the cost of education. Some argue that the government should consider exempting higher education institutions from GST to make education more accessible and affordable.
In conclusion private coaching centers and distance education institutions are subject to GST at a rate of 18% on the services they provide and it is essential to comply with the tax laws and regulations to avoid penalties and legal issues.